The Most Comprehensive Summary Of Hong Kong’s Digital Currency Regulatory Policies

The most comprehensive summary of Hong Kong’s digital currency regulatory policies

Hong Kong digital currency policy background

As an autonomous special economic zone, Hong Kong has a different political system from the mainland, which has a certain impact on the local economy. Therefore, Hong Kong has not followed mainland China’s attitude towards cryptocurrencies, and bans such as the comprehensive ban on ICOs promulgated by mainland China in September 2017 have not been implemented in Hong Kong. This has led many cryptocurrency-related businesses to turn to Hong Kong, which has crypto-friendly policies after being suppressed by the Chinese government. For example, when Chinese authorities moved from a wait-and-see approach to banning ICOs, China’s main Bitcoin conference moved from Beijing to Hong Kong, and the world’s largest exchanges opened offices in the SAR.

Meanwhile, the Hong Kong government has expressed support for blockchain and has shown a more active pro-crypto stance than the mainland Chinese government. The head of the national economic agency d'fintech believes: "A friendly attitude towards blockchain gives us an advantage. In some cases, currency speculation and ICOs can raise funds quickly. But we look forward to building new businesses and infrastructure in Hong Kong For existing businesses, ensure that technology and innovation continue to drive growth in the financial industry.”

Hong Kong blockchain trade finance platform to launch in September

The Hong Kong Monetary Authority (HKMA), which is actually the central bank of the autonomous region of Hong Kong, China, plans to launch a real-time blockchain trade finance platform in September 2018.

The Financial Times reported on Monday that the HKMA’s blockchain platform has 21 banks participating as participating nodes, including HSBC and Standard Chartered.

The project was announced in early 2017, when reports emerged that a number of banks had completed testing of a trade finance platform with MAS to increase transparency in data sharing between financial institutions. Participants at the time included the Hong Kong Monetary Authority, Bank of China, Bank of East Asia, Hang Seng Bank, HSBC, Standard Chartered Bank and Deloitte Consulting.

The MAS explained: “The platform aims to reduce fraud related to trade finance and dual finance, thereby increasing credit availability and reducing long-term financing costs. This in turn may help small and medium-sized enterprises (SMEs) access trade finance. ”

In addition to these banks, other institutions have also expressed interest in the platform, and the HKMA expects more banks to join in the future. If the platform comes online, the HKMA project will be one of the first real-time blockchain trade finance platforms backed by a government agency. Earlier this month, a number of European banks also announced they would join We.Trade, a trade finance blockchain platform built with help from IBM.

At the same time, the HKMA is also working with its Singaporean counterparts to develop a blockchain-based trade finance network to resolve cross-border transactions.

Cross-border blockchain plan

The Hong Kong Monetary Authority (HKMA) collaborated with Singaporean stakeholders in September 2017 to implement the block-driven project to maximize trade and financing between the two global financial centers. As of November 2017, approximately 20 banks from both sides had participated in the project to alleviate the slow process of cross-border transactions.

Around the same time, in November 2017, the Hong Kong government announced plans to create a blockchain-based trade finance system as part of China’s Belt and Road Initiative (launched by President Xi Jinping in 2013 between China and its global partners) a part of. As part of the National Program on Trade Links between Countries. Therefore, Hong Kong’s Minister of Financial Affairs and Finance, Lau Yi-cheung, claimed that this technology can significantly reduce the human resource investment and time in trade finance and “reduce the opportunity for cheating.”

Trade along the Belt and Road is mainly conducted by small and medium-sized enterprises, so blockchain’s distributed ledger technology can help reduce the need for central agencies and middlemen.

Blockchain has greater influence in China. Alibaba's Ant Financial (formerly Alipay) tested its first blockchain remittance on June 25, connecting it between Hong Kong and Philippines payment app GCash. The fund transfer was a joint project between Alibaba and local telecommunications company Globe, and the entire transaction took only three seconds. Jack Ma, CEO of Ant Financial, said: "Using blockchain to achieve cross-border remittances has been one of the projects I have been most concerned about in the past six months. This service starts in Hong Kong and will be extended to other parts of the world in the future. "

Just one day after the test, on June 26, the Hong Kong Monetary Authority and the Financial Services Regulatory Authority (FSRA) of the Abu Dhabi Global Market (ADGM), the UAE’s financial market regulator, signed a fintech cooperation agreement, “About leveraging this to further consolidate Hong Kong’s establishment of a The international trade network of blockchain has gradually become the interest of blockchain paradise.

ICOs and exchanges regulated by the China Securities Regulatory Commission

While Chinese authorities have imposed a blanket ban on ICOs, Hong Kong regulators have adopted a wait-and-see approach. In September 2017, Hong Kong’s Securities and Futures Commission issued a public warning about the potential dangers of cryptocurrency investment, noting that ICOs may be considered “securities.” This means they must be registered with a regulatory agency before they can be officially issued. The U.S. Securities and Exchange Commission (SEC) has previously expressed a similar position. Its commissioner publicly stated that he has not seen an absolutely reliable ICO, so it needs to be registered with the SEC before it can be issued to U.S. investors.

In February 2018, the China Securities Regulatory Commission issued a second public warning on the potential risks of cryptocurrency trading and ICO investment, reminding investors to beware of being deceived. The China Securities Regulatory Commission said it will continue to pay attention to and strictly "supervise" the cryptocurrency and ICO market. Its CEO Alder said that after the exchange and 1C0 provider pass the review and qualifications, "market professionals" should also play a supervisory role to ensure the legality of token issuance and exchange.

However, Liang Fengyi, executive director of the China Securities Regulatory Commission Intermediary Agency, said that if investors cannot understand the risks of digital currencies and ICOs and are not prepared to suffer huge losses, then they should not invest.

However, this time the China Securities Regulatory Commission hinted that it will increase supervision. The regulator said it had issued warning letters to seven Hong Kong-based or registered cryptocurrency exchanges, saying they should not trade virtual currencies without a license. In response, most trading platforms denied providing such services or “taking immediate corrective measures,” such as removing certain digital currencies from exchanges.

In addition, the China Securities Regulatory Commission took tough regulatory measures in March. The agency halted Black Cell’s 1C0, arguing that the offering was an unregistered collective investment scheme (CIS). According to the SEC’s response, Black Cell’s 1C0 plan — which told investors their investment would fund the development of a mobile app and give token holders the right to acquire equity in the company — constituted a CIS and therefore constituted a “security.” risk, meaning it must be registered with a regulatory agency before selling. Black Cell was also ordered to return investments made by its Hong Kong investors in its tokens.

On April 13, Liang Fengyi, executive director of the China Securities Regulatory Commission’s intermediaries, further explained the nature of ICO, saying that such financing projects are more suitable for venture capital funds.

Liang Fengyi emphasized that although the China Securities Regulatory Commission plays the role of a regulatory agency, they have a friendly attitude towards blockchain technology. She also pointed out that many investors are unaware of this new technology. Liang Fengyi said: “Because blockchain projects contain a lot of technical expertise, there is a certain threshold for ordinary investors. They cannot distinguish good projects. This kind of investment is more suitable for professional investors such as venture capital funds.” Leung added: “In fact, many ICOs on the market now are mostly suspect, if not outright fraudulent projects, because their cross-border and crypto-asset nature puts them beyond the scope of regulatory scrutiny.”

Hong Kong is expected to become an international blockchain center

On June 27, 2018, the Hong Kong Securities and Futures Commission (SFC) announced in its annual report that it would pay close attention to the development of cryptocurrency and 1C0. Regulators said there were "risks" associated with the new technology and they would "intervene where appropriate".

In fact, the China Securities Regulatory Commission has formulated clear regulatory policies this year, taking actions to regulate local cryptocurrency exchanges and ICOs, and reminding the public of the potential risks of investing in the cryptocurrency market. At the same time, Hong Kong continues to promote blockchain-based financial cross-border plans, hoping to become an important international blockchain center.

标签： #digital currency #ico #blockchain #currency #finance